Agri SA comments on Exropriation Bill of 2015

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Agri SA comments on Expropriation bill, no 4 of 2015
1. Background
Agri SA is a federation of agricultural organisations comprising of nine provincial
agricultural unions and 24 commodity organisations. Through our affiliations, we
represent a diverse group of farmers irrespective of gender, colour or creed.
Agri SA’s support for orderly land reform stands firm. Agri SA concedes that
equitable land distribution is a prerequisite for rural stability and the organisation
has long been committed to co-operation in implementing land reform.
In the Agri SA policy document on land reform, the following policy views are
stated with regards to expropriation:

Expropriation should only be used as a measure of last resort where bona
fide negotiations have failed. In such cases, the Expropriation Act should
apply.

The procedures followed with expropriation should be fair towards the
landowner, and the principles of administrative justice should apply.

The purpose of the expropriation should be clear.

A landowner whose land is expropriated should always have recourse to
the courts.

Under no circumstances should the payment of compensation to a
landowner be dependent on the state’s ability to pay.

It is of utmost importance that a transparent process be followed in valuing
land. Professional valuators with experience in farm valuations should be
used and landowners should be consulted in drawing up the guidelines for
valuation. Landowners should also have access to valuation reports.

Payment should be immediate and in cash, except in the case of Land
Bank mortgages, where payment due to the Land Bank could be made in
other ways.
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Agri SA was one of the organisations that opposed the 2008 Expropriation Bill
on the basis that we believed that it limited access to the courts and was not
in line with sections 25, 33 and 165 of the Constitution. This has been
rectified in the current Bill. After the withdrawal of the previous Bill from the
parliamentary process the Department of Public Works (DPW) embarked on a
long process to redraft the Bill and they ought to be commended on the
inclusive and extensive process of consultations and their robust engagement
with stakeholders in NEDLAC. Agri SA commented on the draft bill and also
participated, as part of the Business delegation in the NEDLAC process. We
found DPW to be open to criticism and comments and willing to truly engage
all stakeholders. As a result, the Bill before Parliament has been improved
through the public comment process as well as the NEDLAC process and,
from our point of view, there remain only a few areas of concern.
Expropriation or compulsory acquisition as it is often referred to in
international literature is a tool which is widely used internationally and this
has been the case for many decades. As such, international best practice
models have emerged over time. A recent study by the United Nations Food
and Agricultural Organisation (FAO) reflected on international best practice
regarding the compulsory acquisition of land and compensation. The
publication
can
be
viewed
at:
ftp://ftp.fao.org/docrep/fao/011/i0506e/i0506e00.pdf.
The report states
amongst other things: “Countries retain powers of compulsory acquisition in
order to enable governments to acquire land for specific purposes. The nature
of these powers and the ways in which they are used are invariably sensitive
and have wide implications, including from the perspective of international
agreements on human rights and their national expressions. Compulsory
acquisition is disruptive for those who are affected and whose land is taken
and, if done poorly, will have serious negative impacts on people and their
livelihoods. It is important, therefore, that satisfactory approaches are in place
and effectively implemented to ensure that communities and people are
placed in at least equivalent positions to those before the land acquisition.
Prerequisites for this are appropriate legal frameworks and capacities for
implementation, and good governance and adherence to the rule of law.” The
report then proposes a number of principles for legislation on compulsory
acquisition, which Agri SA fully supports:
“Principles for legislation on compulsory acquisition should include:
• Protection of due process and fair procedure. Rules that place reasonable
constraints on the power of the government to compulsorily acquire land
strengthen the confidence of people in the justice system, empower people to
protect their land rights, and increase the perception of tenure security. Rules
should provide for appropriate advance consultation, participatory planning
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and accessible mechanisms for appeals, and should limit the discretion of
officials.
• Good governance. Agencies that compulsorily acquire land should be
accountable for the good faith implementation of the legislation. Laws that are
not observed by local officials undermine the legitimacy of compulsory
acquisition. Good governance reduces the abuse of power and opportunities
for corruption.
• Equivalent compensation. Claimants should be paid compensation which is
no more or no less than the loss resulting from the compulsory acquisition of
their land. Laws should ensure that affected owners and occupants receive
equivalent compensation, whether in money or alternative land. Regulations
should set out clear and consistent valuation bases for achieving this.
Our members are heavily invested in land, and expropriation will always be an
unpleasant process, which nobody is keen on, so they are understandably
concerned about the possibility of expropriation. Nevertheless, we realize that
expropriation is a necessary tool in all societies.
2. Specific comments
2.1
Definitions
 The definition of “expropriating authority” has been formulated in
very wide terms. It is defined as “an organ of state or a person
empowered by this Act or any other legislation to acquire
property through expropriation”. In terms of section 239 of the
Constitution, any functionary or institution which exercises a
power or performs a function in terms of the Constitution or a
provincial Constitution or exercises a public power or performs a
public function in terms of any legislation is included in the
definition of “organ of State”. We believe that this definition
should be narrowed down.
 The definition of “public interest”: We submit that this definition is
too broad and leaves room for uncertainty as to the
expropriating authority’s interpretation of matters falling within
the public interest. Section 25(1) of the Constitution after all
stipulates that no law may permit arbitrary deprivation of
property. We submit that it is therefore necessary to move the
discretionary determination as to what constitutes expropriation
“in the public interest” from the executive authorities to the
legislative authorities (either through a circumscribed definition
of “public interest” or through ministerial guidelines) in order for
government to exercise its powers in terms of clear rules and
principles in a non-arbitrary fashion.
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2.2
Clause 11: Consequences of expropriation of unregistered rights
and duties of expropriating authority
Subclause 5 states as follows: “(5) If the expropriated owner or
expropriated holder knew of the existence of an unregistered right
contemplated in subsection (2) and failed to inform the expropriating
authority of the existence thereof, the expropriated owner or
expropriated holder, as the case may be, is liable to the expropriating
authority for any loss incurred in the event of
the expropriating authority having to pay compensation for the
expropriation of the
unregistered right after the date of payment of compensation to the
expropriated owner or expropriated holder, as the case may be.” The
definition of an unregistered right is very wide and quite vague. It may
very well be that a landowner was aware of people utilising the land for
gathering firewood or access to graves, but did not know that these are
compensable rights. This provision seems to be placing an
unacceptable burden on owners to know exactly who is exercising
what rights on their farms (keeping in mind that some farms are very
large) and knowing which of these rights qualify for compensation upon
expropriation.
2.3
Clause 12: Compensation for expropriation
The role of market value in the determination of compensation for
expropriation has long been a point pondered by academics [see
Andra Eisenberg ‘Different constitutional formulations of compensation
clauses' (1993) 9 SAJHR 412; Aninka Claassens ‘Compensation for
expropriation: The political and economic parameters of market value
compensation' (1993) 9 SAJHR 422; Duard Kleyn ‘The constitutional
protection of property: A comparison between the German and the
South African approach' (1996) 11 SA Public Law 402 at 441—5; A J
van der Walt, ‘The Constitutional Property Clause: A Comparative
Analysis of Section 25 of the South African Constitution of 1996’ (1997)
141—8; Geoff Budlender ‘The constitutional protection of property
rights' in Geoff Budlender, Johan Latsky & Theunis Roux (eds) Juta's
New Land Law (Original Service 1998) at 1—56—67; Jill Zimmerman
‘Property on the line: Is an expropriation-centered land reform
constitutionally permissible?' (2005) 122 SALJ 378; and AJ Van Der
Walt, ‘Reconciling the states duties to promote land reform and to pay
‘just and equitable' compensation for expropriation’ 2006 SALJ 23].
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The general consensus between these authors is that, in order to
promote and facilitate effective land reform expropriation, it is
necessary to weaken the grip of the market value principle for
compensation, but that all the relevant circumstances (including the
ones mentioned in section 25(3)(a)-(e) of the Constitution, but not
restricted to them) should be considered together in deciding what
would be just and equitable compensation [see AJ Van Der Walt,
‘Reconciling the states duties to promote land reform and to pay ‘just
and equitable' compensation for expropriation’ 2006 SALJ at 26].
In practice, market value still plays a useful role because of the
determinacy and quantification difficulty in establishing appropriate
consideration. This is especially clear from the practice to first
establish market value, as an initial indicator of value, and then
determine whether it should be adjusted in view of the other less
quantifiable factors in section 25(3) of the Constitution to be more just
and equitable [see the court decisions in Khumalo v Potgieter [2000] 2
All SA 456 (LCC); Du Toit v Minister of Transport 2003 (1) SA 586 (C)
paras 23—52]. In Du Toit v Minister of Transport 2006 (1) SA 297
(CC) para 35 the majority of the Constitutional Court followed a
comparable approach in deciding whether a particular compensation
award was constitutionally justifiable: first establish what compensation
would be according to the ‘standard' approach and then check whether
it is in line with the other constitutional demands. Market value should
of course not be favoured at the expense of the other considerations
enumerated in section 25(3) of the Constitution, but we are of the
opinion that it remains an acceptable starting point.
Agri SA accepts that section 25 of the Constitution is the basis for the
calculation of compensation and that the norm is “just and equitable
compensation”. We do however subscribe also to the principle of
“equivalence” as set out in the FAO report on compulsory acquisition
and compensation. This principle entails: “Compensation, whether in
financial form or as replacement land or structures, is at the heart of
compulsory acquisition. As a direct result of government action, people
lose their homes, their land, and at times their means of livelihood.
Compensation is to repay them for these losses, and should be based
on principles of equity and equivalence. The principle of equivalence is
crucial to determining compensation: affected owners and occupants
should be neither enriched nor impoverished as a result of the
compulsory acquisition. Financial compensation on the basis of
equivalence of only the loss of land rarely achieves the aim of putting
those affected in the same position as they were before the acquisition;
5
the money paid cannot fully replace what is lost. In some countries,
there is legal provision recognising this in the form of additional
compensation to reflect the compulsory nature of the acquisition. In
practice, given that the aim of the acquisition is to support
development, there are strong arguments for compensation to improve
the position of those affected wherever possible.”
Agri SA’s view is that land reform is a national priority that should be
funded with general taxpayer money. Individuals cannot be expected
to bear this cost. Landowners, whose land is earmarked for land reform
purposes, must be placed in a position to continue farming elsewhere
in a similar manner, should they wish to do so.
It should be clear that compensation paid to holders of unregistered
rights is over and above any compensation paid to the owner and is not
to be subtracted from compensation due to the owner.
Clause 12.2 states that the fact that the property has been taken
without the consent of the expropriated owner or expropriated holder,
must not be taken into consideration by the expropriating authority. .
Expropriation without consent is a traumatic experience often causing
financial loss, emotional trauma and suffering and a property owner
should be compensated for this. The concept of a “solatium” as it
appears in the Expropriation Act should therefore be retained and
actual financial loss resulting from the expropriation should also be
compensated for. The particular sub clause (12(2)(a) should be
deleted.
2.4
Clause 18: Property subject to mortgage bond or deed of sale
Agri SA supports the wording of clauses 18(1) and (2) as it gives some
protection to landowners, who have very little bargaining power vis-a-is
financial institutions holding bonds over property. Whilst Agri SA
recognizes the critical importance of investment in the sector, we
cannot support a scenario where the landowner alone carries all the
risk of possible lower than market value compensation and ends up
walking away with nothing if the bond is more than the compensation
received for the property. This is one of the reasons why marketrelated compensation is so important to our members and our sector,
which is very dependent on production credit. If financial institutions
were to consider farms too great a risk, there are very real implications
for food security. At the same time, individual landowners cannot be
expected to foot the bill for land reform through reduced non-market
related compensation. A balance needs to be struck somehow.
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Conclusion
Experience in other countries has shown that expropriation does not
speed up land reform significantly, nor does it make land reform more
affordable. In fact the contrary seems to be true. Expropriation does
have a limited role to play in land reform as a measure of last resort.
When expropriation is utilised it should be perceived by all to be a fair
and transparent process.
Current landowners should receive
compensation, which will enable them to start anew somewhere else;
they should not be worse-off as a result of the expropriation. The full
cost of expropriation should be borne by the fiscus, individual
landowners cannot be expected to foot the bill for land reform through
reduced non-market related compensation. In the interest of the future
of this country government should nurture the agricultural sector.
Agri SA hereby also requests an opportunity to address the Portfolio
Committee on Public Works on this submission.
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